"It should have nothing to do with the trend of the Hong Kong stock market."
Wang Shujie, product manager of 'Nuo'an Blue Chip Mixed Selection' fund, also gazed at the trends of the two major markets and the performance of various core main lines in the market.
After a moment of thought, he said,
"It's mainly an issue of capital, and at the current critical time point, the adjustment movements of major institutions in the industry have caused drastic fluctuations in the market."
"I originally thought there would be a 'good start',"
Li Shangfeng said.
"I didn't expect the first trading day of the new year to be a scene of indexes plummeting."
"However, the market has been adjusting for quite some time, from early December until now,"
Wang Shujie said.
"At this point, there's no need to panic too much. On the contrary, with many institutions adjusting their positions, some main sectors with significant and continuous capital inflows during a weak market pullback might present good opportunities."
"But looking at the chart pattern, it feels like the market's support is problematic!"
Li Shangfeng said.
"What's the problem?"
Wang Shujie asked with a smile.
Li Shangfeng replied,
"'Big Finance,' 'Big Infrastructure,' and 'Big Consumption'—these core main lines on the main board are relatively okay, but a lot of concept stocks in the 'SME and ChiNext' sector, as well as many popular concept stocks previously hyped by the market and embodying market bullish sentiment, clearly show signs of liquidity shortage in their trading patterns. It feels like the buying power on the market simply can't absorb the selling."
"'SME and ChiNext' concept stocks inherently lack core logical support,"
Wang Shujie said.
"These stocks should have adjusted long ago. In fact, if you ask me... the market's investment ecosystem should shift towards blue-chip and high-performing white-horse stocks on the main board. 'SME and ChiNext' concept stocks without performance and growth support should go back to where they came from."
Li Shangfeng said,
"That's the theory, but market investment, besides the core underlying logic, also needs the cooperation of sentiment. Without bullish sentiment, without positive and continuous short-term profit-making effects, there will be no incremental capital entering the market, and naturally, the overall market valuation cannot be supported. After all, the core driving force behind stock price appreciation is solid incremental capital."
"Short-term market investment sentiment is cyclical,"
Wang Shujie said.
"We don't need to worry too much about this. What goes down will naturally go up. What we should be examining now is the fundamentals of the stocks held by our fund products and the expected changes in future performance releases. As long as the fundamentals continue to improve and the expectations for future performance releases strengthen, the more the stock price pulls back and falls, the more we should step in to increase our holdings and buy."
"Boss, do you mean... we continue to increase our positions?"
Li Shangfeng asked, somewhat surprised.
Wang Shujie nodded and said,
"Buffett once said that when others are fearful, one should be greedy. The market has now pulled back from 3600 points to below 3400 points. Both the time and space for medium-to-short-term adjustments are sufficient, and the corresponding negative news has been fully reflected in the index's pullback.
Furthermore, the fundamentals of the blue-chip and white-horse stocks heavily held in our fund products are generally improving. Over the coming quarter, or even a year, performance is expected to show a growth trend.
This means that as stock prices have fallen during this period, their valuation levels are decreasing, while their investment risk-reward ratio is gradually increasing.
Given this... facing better risk-reward investment opportunities than before, and facing clearly undervalued stocks, with plenty of capital in hand, what reason do we have not to buy?
In my opinion, this is not a crisis, but an opportunity.
At the current stage, major institutional funds in the market are frequently adjusting positions and changing strategies, causing excessively violent market fluctuations, which has left a good entry opportunity.
If we do nothing now and panic along with market sentiment, then when the market eventually calms down, this pit created by major funds adjusting positions will be quickly filled by incoming supporting capital.
It will then be difficult to find such good entry timing and intervention opportunities."
Li Shangfeng listened to Wang Shujie's words and thought carefully.
Although he didn't fully agree with his view, he considered that the current fund's position was not very high, and with investors continuously subscribing for shares, there would be a steady stream of off-market funds replenishing later.
Therefore, increasing some positions at this point was within a reasonable risk control range, so he responded,
"Then I'll have everyone increase the position size by another 5%."
"Good,"
Wang Shujie nodded with a smile.
"However..."
Li Shangfeng paused, then added,
"Which main sector should this additional 5% position mainly focus on?"
Wang Shujie thought for a moment and asked,
"What do you think?"
Li Shangfeng said,
"According to the company's industry research and analysis report, and the trends of major market sectors over the past six months, the 'Big Consumption' main sector, especially the 'Food' and 'Beverage' sub-sectors, should show the most obvious turnaround and have strong expectations for future performance explosions."
"I agree,"
Wang Shujie said.
"There are many signs of consumption recovery."
"So we'll primarily focus on the consumption sector?"
Li Shangfeng asked.
Wang Shujie pondered for a moment and replied,
"To be precise, we can actively try to further increase positions in the 'Baijiu' sector. It feels like the fundamentals of first-tier baijiu brands such as 'Qianzhou Maotai,' 'Wuliangye,' and 'Luzhou Laojiao' continue to improve, and their performance shows signs of a full recovery.
At the same time, due to the industry's negative pressures in the past two years, the market valuation of this sector has been severely compressed.
This means that once the performance of the core stocks in this sector fully reverses, there is a strong expectation gap, with the possibility of a 'Davis double-click'."
"Hehe..."
Li Shangfeng said,
"It seems my thoughts are consistent with yours, Boss. In the 'Big Consumption' main sector, I am also very optimistic about the future trend of the 'Baijiu' sector. Moreover, through market trend analysis over the past six months, it's clear that the trends of the corresponding core stocks in the 'Baijiu' sector are significantly stronger than the broader market. It feels like many major institutional funds have already built large positions or are holding them in this main sector."
Saying that, he didn't wait for Wang Shujie to give any further instructions.
He immediately turned to all the traders in the entire trading group behind him and issued corresponding trading orders, asking them to actively absorb chips from several core stocks in the 'Baijiu' sector during the market's sharp decline, thereby increasing the fund's weighting in this main sector.
And within the 'Nuo'an Blue Chip Mixed Selection' fund product, while the fund manager was rapidly changing strategy, intending to further increase positions and expand the weighting in the 'Baijiu' sector...
At the same time, inside 'Jufeng Asset Management Company' in Modu.
Lu Xiangxiang, the general manager of the company and fund product manager for the 'Jufeng Future Growth' fund product trading department, gazed at the continuously falling market on both exchanges, especially at the 'New Energy Industry Chain' sector which was generally limit-down, and the trends of many core stocks in its 'Lithium Battery' sub-sector.
Her brows were clearly furrowed, and she felt an unusual sense of crisis in her heart.
"Director Lu, today's market trend is a bit off."
While Lu Xiangxiang was frowning in thought, Yu Xiaolu, the leader of the fund product trading group, also hurriedly reported:
"Many previously popular stocks have lost market support and are falling to the limit-down. After the adjustment in December, the market entered a new month, and after the emotional brewing during the holiday, bullish sentiment not only failed to recover but further dissipated.
If this continues... as market sentiment further collapses, it feels like a market liquidity crisis will reappear. I almost feel the atmosphere of the market during the 'stock market crash' again in the current market.
Among them, the core stocks in the 'Lithium Battery' main sector, which our fund product holds heavily, whether they are larger mid-cap stocks like 'Tianqi Lithium,' 'Ganfeng Lithium,' 'DoFluoride,' or smaller small-cap stocks like 'Tianci Materials,' 'PengHui Energy,' 'Dynanonic'...
Their current stock price trends have all broken down, and the technical patterns have completely deteriorated.
Such patterns, fueled by completely collapsed sentiment, even if the industry fundamentals are excellent and the underlying logic of the 'New Energy Industry Chain' main sector remains, will likely face significant adjustments, leading to huge drawdowns in our fund's net value trend."
"So, according to you... what should we do now?"
Lu Xiangxiang asked.
Yu Xiaolu hurriedly responded:
"Director Lu, I think we should first take profits and control the drawdown of our fund products' net value. We cannot disregard the direction of market sentiment, nor can we repeat the mistakes made in the previous two stock market crashes. In the current situation, I feel that market liquidity is already problematic."
Lu Xiangxiang looked at the various heavily held fund stocks that were still plummeting, and at the same time, saw the Shanghai Composite Index, which had fallen by 3% and completely lost the 3400-point support platform.
She sighed helplessly and nodded.
Although she still favored the 'New Energy Industry Chain' as a core main sector, still favored related upstream leading companies in the 'Lithium Battery' sector, and still believed that the prices of 'lithium carbonate' and 'lithium hexafluorophosphate' could reach higher prices amid rapidly exploding market demand.
But as Yu Xiaolu said, with the index and individual stocks comprehensively breaking through important support levels, and market investment sentiment completely collapsing, in order to avoid massive drawdowns in fund net value, and also to prevent a 'stock market crash' scenario with another liquidity crisis, she had to reflexively adopt a strategy of taking profits and reducing positions to control the extent of the fund's net value drawdown.
After Lu Xiangxiang nodded in agreement, Yu Xiaolu, without hesitation, quickly issued a sell-to-take-profit trading strategy to all traders in the trading room, asking them to sell the heavily held 'Lithium Battery' main sector stocks at market price, regardless of cost, to free up positions and recall funds, thereby avoiding the risk of a sustained market crash.
And the major institutions, even large speculative funds and retail investors, who were adopting the same trading strategy, continuously reducing positions and stopping losses during the market crash, became more and more numerous as market trading time progressed and market sentiment further declined.
In fact, seeing the Shanghai Composite Index approaching a 4% intraday decline, and especially seeing the 'CSI 300 Index' rapidly approaching a 5% decline, many large funds, knowing that the market's circuit breaker mechanism had been activated, liquidated their positions frantically.
The liquidation by these funds led to a further market plunge nearing midday.
It also caused a lack of market liquidity, leading more and more stocks to lose market support, being directly locked at the limit-down by panicked sellers fleeing the market.
Finally, when 11:30 AM arrived, and the market entered its midday close, the number of limit-down stocks in both markets rapidly increased in the last ten minutes before the midday close, soaring directly from over 200 to over 700.
"Holy cow, I feel like today the market will have a thousand stocks limit down again!"
After the midday close, as market panic further fermented during the break, Xu Qiao said in the 'Modu Ultra-Short Group' main speculative fund chat group where Su Yi was.
"I have that feeling too,"
Old Zhang responded.
"Damn it, a good start turned into a bad one!"
"According to the new rules, at what index drop does it trigger a circuit breaker?"
Old Wu asked.
Brother Chen replied:
"The 'CSI 300 Index' falling by 5% intraday will trigger a circuit breaker, and after a 5-minute break, trading will resume. Then, if the 'CSI 300 Index' falls by 7.5%, a second circuit breaker will be triggered, which means trading stops for the day and the market closes early."
"Then it feels like the market might hit the circuit breaker mechanism today," Old Zhang said.
Old Wu replied:
"If there isn't enough positive news in this hour, then when the market opens in the afternoon, the index will definitely hit the circuit breaker opportunity. Because once people know this rule, the closer the index drop gets to the circuit breaker threshold, the more panicked they become. It's like a siphon effect; everyone will rush to dump their shares to compete for liquidity."
"Then today... it feels like it's over!"
Xu Qiao said.
"It's probably going to make history again."
Old Zhang said,
"A-shares making history isn't new. Thankfully, I cleared my positions in December, so I can just watch the show now."
"I bought a few chips when the market opened lower this morning,"
Xu Qiao said.
"But in just the few minutes before closing, it already hit the limit down."
As messages refreshed in the group...
At this time, across various stock investment forums, communities, and Tieba groups nationwide, countless retail investors' discussions were overwhelmingly bearish.
Many even had their held stocks locked at the limit-down.
Due to the further spread and generation of panic sentiment, the siphon effect of the circuit breaker mechanism, and the lack of sufficient positive news released by regulators during the midday break...
After a short midday break... when the market reopened for trading, in less than 15 minutes, the 'CSI 300 Index' hit the 5% decline level, triggering the market's circuit breaker mechanism, causing a complete lack of liquidity throughout the market.
And when the market resumed trading after the first circuit breaker, it was observed that the market, aided by even more panic and a more severe siphon effect, plummeted rapidly again.
This time, in just a few minutes, the entire market triggered the second circuit breaker mechanism.
The Shanghai Composite Index plummeted by 7.55%, and the Shenzhen Component Index and ChiNext Index both plunged by over 8.5%.
More than 1500 stocks in both markets hit the limit-down.
For the first time in history, the A-share market completed its closing task before 3 PM, and it was also the first time everyone witnessed the grand spectacle of all market indexes hitting the limit-down.
Upon seeing the Shanghai Composite Index limit-down and trading abruptly halting at 1:33 PM, all investors inside and outside the market, who were following the stock market, showed expressions of immense shock.
Many retail investors who hadn't fully understood the market's circuit breaker mechanism stared at the completely still market screen, their hearts chilling, with a bewildered look in their eyes.
(End of chapter)